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GLG Partners, the hedge fund manager owned by Man Group, has agreed to pay $9 million to settle charges with the US Securities and Exchange Commission for overvaluing assets in a Siberian mining company.

According to a statement today from the SEC: “From November 2008 to November 2010, GLG’s internal control failures caused the overvaluation of the fund’s 25 percent private equity stake in an emerging market coal mining company. The overvaluation resulted in inflated fees to the GLG firms and the overstatement of assets under management in the holding company’s filings with the SEC.”

The case relates to the GLG Emerging Markets Special Assets 1 Fund, a special purpose vehicle that was set up following the resignation of GLG fund manager Greg Coffey in 2008.

One of the holdings in the special-purpose vehicle, which was set up to unwind several hard-to-sell positions, was a position in Sibanthracite Plc, a Siberian mining company.

According to the SEC’s statement: “GLG’s asset valuation policies required the valuation of the coal company’s position to be determined monthly by an independent pricing committee. On a number of occasions, GLG employees received information calling into question the $425 million valuation for the coal company position.”

The statement added: “But there were inadequate policies and procedures to ensure that such relevant information was provided to the independent pricing committee in a timely manner or even at all. There was confusion among GLG’s fund managers, middle-office accounting personnel, and senior management about who was responsible for elevating valuation issues to the independent pricing committee.”

The vehicle has subsequently been dissolved. The SEC statement related to November 2008 to November 2010, a period following Coffey's departure.

Antonia Chion, an associate director in the SEC’s division of enforcement, said in a statement: “Investors depend upon fund advisers to have proper controls in place to ensure that valuations and fees are not inflated. GLG’s pricing committee did not have the information and time it needed to properly value assets.”

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Coffey resigned from GLG in April 2008, triggering widespread redemptions from his main GLG Emerging Markets Fund. The following month, investors were informed that up to 15% of assets in the main emerging markets fund were invested in illiquid positions that could not be easily sold, according to an investor letter.

Illiquid assets were moved into two separate side pockets in July and November 2008, according to investor documents, and GLG continued to charge a 2% management fee on these assets as they unwound them.

GLG consented to the SEC’s order without admitting or denying the charges.

A spokeswoman for GLG said in a statement: “GLG is pleased that this matter is resolved and remains committed to maintaining robust policies, procedures and practices in line with market conventions.”

-- write to hagnew@efinancialnews.com and follow on Twitter @HarrietAgnew